Nasdaq and Borse Dubai have drawn up secret plans to entice the London Stock Exchange into a pan-continental alliance that could challenge a recent merger between France's Euronext and the New York Stock Exchange.

The plan would involve the creation of a new company in which London would have the dominant position, but would link trading platforms in the Gulf states, Sweden and the US.

The project has been hatched by Dubai and Nasdaq, which joined forces last week in a bid to seize control of Stockholm-based OMX. That deal was accompanied by a flurry of activity that also saw Dubai and the Qatar Investment Authority emerge with just under 50 per cent of the LSE, which is headed by Clara Furse. Qatar, too, bought a 10 per cent holding in OMX.

A City source said: 'Dubai acquired a slug of shares in the LSE from Nasdaq for less than Qatar [was offering]. That means Nasdaq and Dubai have wider objectives - both are known to want a closer relationship with London.'

City analysts say it is still possible that London could face a hostile bid from Nasdaq/Dubai in February when the American exchange is allowed to bid again under Takeover Panel rules. Seven months ago, Nasdaq launched a bid for LSE, but failed to gain sufficient support from shareholders. It was left holding a 31 per cent stake, which it sold last week to its new ally Dubai. That deal allowed Nasdaq and Dubai to try to resolve a battle for OMX in which the two were originally pitted against each other (although OMX's fate is not decided because the Qatari Investment Authority could still step in with a higher offer).

Some analysts believe that Nasdaq/Dubai could find themselves fighting for control of the LSE with the Qataris, who are closely allied with Furse.